High-Tech Entrepreneurship in Asia
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High-Tech Entrepreneurship in Asia

Innovation, Industry and Institutional Dynamics in Mobile Payments

Marina Yue Zhang and Mark Dodgson

The option for consumers to make payments for services and products via mobile telephones has created a dynamic new industry. High-Tech Entrepreneurship in Asia illustrates how small, entrepreneurial firms in Asia have devised and produced innovations crucial for this industry’s development.
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Chapter 7: The Development of the Mobile Payment Industry in China

Marina Yue Zhang and Mark Dodgson


INTRODUCTION China’s very fast economic growth since the late 1970s has disproportionately raised the standard of living faster in major urban areas than in rural areas, but modern telecommunications networks now blanket the country and mobile communications are commonplace throughout China. China implemented its first wireless communications network in Guangdong province in 1987. Since then, China has experienced mushrooming growth of its mobile communications networks. The growth rate of mobile subscribers in China since 1987 has been phenomenal. In 2002, the 219 million mobile subscribers (including the PHS 1 subscribers) surpassed the 214 million fixed-line subscribers for the first time (CRC Pinnacle, 2004), which also made China the market with the largest number of mobile subscribers in the world (ITU, 2004a). At the end of 2004, there were over 310 million mobile phone subscribers (excluding PHS users). According to China Research Corporation 2 – a leading market research and consulting firm in Beijing – this number is expected to reach 380 million in 2005. The penetration rate of mobile subscribers at the national level is about 24 per cent, increasing from about 2 per cent in 1998; 3 however, the ratio is much higher in major cities and among young people. In recent years, mobile text messaging service (SMS) has become wildly popular, growing from 26.6 million messages in 2001 and 90 million sent in 2002 to 348 billion sent in 2003 (CRC-Pinnacle, 2004). In addition, Chinese manufacturers (for example, Huawei, ZTE, Datang and Great Dragon) now produce high-quality mobile devices and...

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